Canada’s annual inflation rate slowed to 1.8 per cent in February, falling below the two-per-cent mark as changes in last year’s federal tax break affected price comparisons, according to new data released by Statistics Canada.
The agency reported Monday that the year-over-year inflation rate dropped half a percentage point from January’s reading. The figure also came in slightly below what many economists had expected for the month.
A key factor behind the decline was the impact of last year’s temporary federal “tax holiday,” which removed the federal sales tax from a range of household goods, restaurant meals and other consumer purchases for a two-month period ending in mid-February 2025. Because the tax relief applied to all of January last year but only part of February, the annual comparison helped push the February inflation rate lower.
Restaurant prices showed some of the biggest changes. Inflation in that category slowed to 7.8 per cent in February compared with 12.3 per cent in January as the tax break dropped out of the yearly calculation.
Prices for toys, games and hobby supplies also saw some relief toward the end of the tax holiday period. Grocery prices showed modest but broad-based easing as well. Inflation for food purchased from stores slowed to 4.1 per cent in February, down from 4.8 per cent the previous month.
The cost of beef, which has been a major contributor to rising grocery bills in recent years, also increased at a slower pace. Prices for fresh and frozen beef rose 13.9 per cent compared with a year earlier, nearly five percentage points lower than the increase recorded in January.
A decline in cellular service prices during the month also helped push the overall inflation rate lower.
However, some price pressures remain. Statistics Canada said gasoline prices began to rise near the end of February amid growing tensions in the Middle East, a trend that has pushed fuel costs higher in recent weeks.
Economists say those increases could contribute to higher inflation readings in the coming months. The latest data will be closely reviewed by the Bank of Canada as policymakers prepare to make their next interest rate decision later this week.